Pricing The Same Product Differently For More Profits

Most business coaches teach business owners who are just starting out to study who their target market is. This study would especially include the price at which they would sell to their target market. However, this strategy is not always set in stone.

For example, an aspiring owner of a high fashion clothing company might conclude that they should set an expensive price for their clothing products but later on realize that they should lower their prices in order to attract customers.

This high fashion clothing business owner might thrive by lowering their clothing product’s prices but they might now suffer from low profitability since they are now not attracting the few but higher paying customers.

This is the reason why there are companies who sell differently priced products for different types of customers according to their purchasing power. Simply put, pricing can make or break a company’s profitability.

There are companies who actually sell the same product but with different prices to different customers and they are getting away with it. There are online content creators who actually name companies who do this but due to legal concerns I won’t be giving out company names.

There are for example clothing, electronics and appliance manufacturers who sell the same product to the poor, middle income and upscale customers. What they usually do is to just change the brand name of their product to appeal to these different market segments.

This especially happens with clothing products. Often, only the labels in the clothes are changed and nothing else. With electronics and appliances, the same product is sold to different customers by only doing minor cosmetic modifications on the product.

Before we proceed, let’s first discuss the elephant in the room which is the issue of ethics. You might be now wondering if it’s actually legal to sell the same product at different prices according to your customer’s purchasing power.

The answer is: “Yes, it’s legal and it’s called Price Discrimination”. According to the law, it is perfectly legal for companies to sell the same product at different prices to reflect the different cost of selling to varying market segments.

So, it’s legal, but is it actually ethical? The answer to this question largely depends on the opinion of each individual. Each person has their own opinions which might agree or disagree with another in varying degrees.

But in general, I’ve never heard a company publicly declare that they’re selling the same product but at different prices. This is because the very idea is very controversial.

Whatever your opinions are regarding this product pricing strategy, it is undeniable that this product pricing strategy is profitable. This is because your company can sell to both the higher and lower end of the market with minimal cost.

Your manufacturing cost could be as little as printing new labels for your product. Of course you also have to spend on advertising to target either the high end or low end of the market, but of course manufacturing costs are much important than advertising costs.

Let’s say you increase your product’s price by two times or even three times when you target the high end of the market, you would sell less products but would have a much higher profit per product. With this, you actually even save on manufacturing costs.

Let’s say that you have huge inventories of unsold products. You could put a huge “sale” sign on the products but of course this would lower the image of your product. Or you could do the alternative and sell your products under a different label to the lower end of the market.

As you can see, pricing and branding are very important in how profitable your company can become. The more flexible are your branding and pricing strategy, the more is the possibility that you would attract more market share.

Companies go as far as setting up entirely new companies just to be able to set up different branding and pricing for their products. As I have said, not many people like companies who sell the same product at different prices.

But this strategy does not have to be expensive. For example, OEMs or Original Equipment Manufacturers are companies who not only sell their own product but also makes the same products or components for different sellers and even competitors.

You can for example setup a small t-shirt manufacturing shop and start other t-shirt manufacturing shops whose only purpose is to stamp their individual labels on the t-shirts you deliver to their shops.

This way, your shop retains their individuality in your customer’s eyes should your customer become interested in knowing where the products they bought came from.

Here’s a little test on how to see if your product would appeal to different customer segments based on their pricing. Let’s say you sell chocolate brownies. You can wrap your chocolate brownies in cheap, semi-expensive and expensive packaging.

Then you price each one of them differently, from cheap, affordable to expensive. Then you see which one is the most profitable in terms of customer sales. Of course, you would only know the result after a few tries.

But in the end, this cheap “product research” would benefit your sales in the long run. But what about if someone asks what’s the difference between your cheap, affordable and expensive brownies?

Do you tell them that they’re basically the same product just with different packagings? Of course you have to tell the truth or risk the consequences of lying some other time later. But you could also sell to them the importance of your product’s packaging.

Like how your more expensive products are better as gifts. This is the same whether you are selling a chocolate brownie, clothes or anything. This is because a lot of customer value the worth of a product depending on their price.

There are a lot of people who actually buy a product just because of their price tag. For example, if you would go to a department store to buy long-sleeved office shirts, you would almost see rows after rows of long-sleeved office shirts which are similar.

Usually, the only difference between these long-sleeved office shirts are their labels and price. Having bought many of these shirts for almost my entire lifetime, I could definitely say that branding and price have nothing to do with quality with these shirts.

I have bought expensive shirts which turned out to be of poor quality and I have bough cheap shirts which turned out to be of high quality. But for most people, the measure of quality and prestige has always been the price tag of a product.

But even though a lot of people think this way, a disproportionate number of buyers have limited or even have no budgets and buy products purely on price. This just means that companies must also have price competitive products.

And this is the reason why a company can price the same product differently, because different customers have different reasons for buying the same product.

A company’s product pricing can make or break a business. A rigid pricing model can severely limit a company’s growth and might even cause it to go bankrupt. By pricing the same product differently, a company not only stands to earn more but also increase their market share.

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